Capital Research and Management, manager of the American Funds, is under investigation by the Securities and Exchange Commission for possible conflicts of interest in its directed brokerage arrangements, The New York Times reports.
Specifically, regulators are looking at whether the firm rewarded brokerages that pushed its funds unduly with brokerage commissions, failing to get the best execution price on trades for investors. The firm may have been placing its own interests ahead of that of investors, therefore neglecting its fiduciary responsibility.
A spokesman for Capital declined to comment for The Times, but did reemphasize an early assertion that the firm is fully cooperating with federal and state regulators, both of whom had requested information from the firm.
Since revelations of the scandal last September, regulators have probed deep into the industry and are scrutinizing a large number of practices, including a number of areas rife with potential conflict of interest abuses.
Revelations of potential wrongdoing should come as a surprise to many as a large number of investors sought shelter in the high-integrity American Funds, following news of wrongdoing at Putnam, MFS, Janus and Strong. So far this year, American Funds has seen nearly $33 billion in inflows into its equity portfolios, gathering almost 29% of all equity inflows, according to AMG Data Services. In comparison, Vanguard took in 21%, while Fidelity captured 12%.
Furthermore , Investment Company Institute Chairman Paul G. Haaga Jr. is an executive vice president and director at the firm.